Trump Campaign Billed the Trump Corporation 90k for Legal Consulting in June 2017

We have been keeping track of the payments made by the Trump campaign to Trump owned businesses as each FEC filing becomes available. You can find the results through 2016 here. Since President Trump registered as a candidate on inauguration day, the campaign committee can continue to make payments for campaign expenses. Payments to Trump companies that occurred during the first quarter of 2017 can be viewed here. The data from the second quarter of 2017 is now available from the FEC website, and we have summarized the payments to Trump-owned companies below:

Recipient Total Disbursements
TRUMP TOWER COMMERCIAL LLC $120,450
THE TRUMP CORPORATION $89,561
TRUMP INTERNATIONAL HOTEL $4,610
TRUMP RESTAURANTS LLC $2,000

Despite the start of the 2020 election cycle being years away, the campaign is still paying about $40,000 a month to have a headquarters in Trump tower in New York City. The payments to Trump companies in this quarter have slowed a bit, from about $300,000 in Q1 of 2017 to about $210,000 in Q2 of 2017. Another especially noteworthy item from this quarter's report is that the Trump campaign began paying Alan Futerfas, the lawyer representing Donald Trump Jr. in the ongoing investigation of alleged collusion between the Trump campaign and Russian nationals, on June 27 2017. This payment occurred about two weeks before Trump Jr.'s emails about his infamous 2016 meeting in Trump tower with a Kremlin-connected lawyer became public. Additionally, Giles-Parscale, a web design and digital marketing company which has been paid over $90 million by the Trump campaign including $2 million in the second quarter of 2017, has reportedly hired Eric Trump's wife Lara.

What really stands out is the June 30, 2017 payment in the amount of $89,561, to the Trump Corporation, which was described by the campaign as a payment for "Legal Consulting." This is the first time the Trump campaign has paid a Trump business instead of an outside law firm for this service. We asked a friend of Unbury the Lead, an attorney licensed to practice law in the state of New York, to take a look this uniquely unusual disbursement from the Trump campaign to the Trump Corporation. Below is that person’s initial reaction to the disbursement, which is not to be taken as legal advice:


 

This roughly $90k payment is listed as payment to the Trump Corporation for “Legal Consulting.” This is exactly the same description that was given for every one of the payments that were made to the Trump campaign’s law firms, including the payments made in 2017: a June payment to the noted law firm Jones Day, Trump's main law firm; and June payment to the Law Office of Alan S. Futerfas, an attorney that CNN has reported on who holds himself out as a White Collar Criminal Defense attorney. Despite how unusual it would seem for the Trump campaign to pay the Trump Corporation for legal services, let’s give the Trump Campaign the benefit of the doubt and interpret this payment as compensation for legal services.

It is unusual for a payment for legal services to be made to an organization that is not a law firm, a non-profit, or a body of the government. The Trump Corporation is indeed a corporation, one that was incorporated in the state of New York in 1980. The Trump Corporation is registered as a standard Domestic Business Corporation. In other words, the organization was not set up, at inception, as a partnership nor as a Professional Services Corporation. This is important because New York attorneys can only sell legal services if they work for an organization that is set up under the law, at inception, to sell professional services (see, e.g., NY Bus Corp L § 1503(b) (2012). Accordingly, it is difficult to understand why the Trump Corporation would be hired to render legal services, when it is not legally authorized to sell those services.

Again, giving the benefit of the doubt that the organization itself has somehow secured the right to sell legal services, there is still another major reason why any lawyer working for the Trump Corporation cannot sell his or her services to an external customer: the individual attorneys that work for the Trump Corporation are required to abide by their ethical obligations as lawyers. Selling their services to an external customer is a violation of New York's ethics rules. For example, the New York Rules of Professional Conduct (“RPC”) for lawyers provide, at Rule 5.4(d), that a lawyer shall not practice with an entity that is authorized to practice law for profit if: a nonlawyer owns any interest therein; a nonlawyer is a member, corporate director or officer thereof; or if a nonlawyer has the right to direct or control the professional judgment of a lawyer. We can set aside the questions of who owns the privately held Trump Corporation, and whether any attorneys working for the organization are able to exercise independent professional judgment. Those questions that are raised by Rule 5.4(d) don’t need to be answered, because we know that Eric Trump, a nonlawyer, is currently registered with the New York Secretary of State as the Chief Executive Officer of the Trump Corporation. It is a violation of the RPC for an attorney to work for an organization that is not entirely managed by attorneys, including the Trump Corporation, because nonlawyers are not subject to the same ethical requirements that lawyers are. Accordingly the Trump Corporation lawyers that rendered the legal services may be subject to discipline, and may even be at risk of being disbarred.  

If we continue to give the benefit of the doubt, then we should consider the scenario where the Trump campaign mischaracterized the services that were rendered as legal services. In this situation the Trump Corporation must dispute their characterization as professional legal services. This explanation would suffer from a credibility issue, as one part of the Trump team would be contradicting another mouthpiece of the very same team. We will ignore the credibility issue, however, because it is moot in light of RPC Rule 5.7(a)(2). This rule says that lawyers that are providing services that are nonlegal services are still required to obey the RPC if the recipient of the services, i.e. the Trump campaign, could reasonably believe that the services received are a part of an attorney-client relationship. Further, Rule 5.7(a)(4) requires the lawyer to advise the customer in writing that the services are not legal services. In this case, the FEC disclosure that describes the services rendered as Legal Consulting makes it clear that services were indeed viewed by the Trump campaign as legal services. The attorneys who provided these services were ethically bound to avoid this scenario if they did not want to be obligated to obey New York's ethics rules. It appears that they failed.

Irrespective of whether the $90k of services billed for by the Trump Corporation were for services legally and ethically rendered, this is a strange scenario. The Trump campaign already hired Jones Day quite some time ago. According to a recent review, Jones Day is the largest law firm in the United States of America. Jones Day consistently ranks as one of the top law firms in the world. It is not clear what legal expertise the Trump Corporation has that Jones Day's prestigious swarm lawyers cannot provide. That question may have no answer. I can add that Trump campaign has rarely sought legal services from anyone other than Jones Day in 2017, according to the relative scarcity of disclosed payments to other firms, and the fact that the amounts of money paid to those firms are small. Those other firms were likely involved for very specific reasons, such as a hiring an influential local attorney that has a special relationship to the judge that is overseeing a case. In contrast, the Trump Corporation was paid more money that every single law firm except two, Jones Day and Locke Lord (which collected very little money compared to Jones Day). It is curious that the Legal Consulting fee that was owed to the Trump Corporation was so valuable compared to nearly all of the other law firms retained by the Trump campaign.

Another scenario worth considering is that not all legal expenses are attorney's fees. According to at last one account, the Trump campaign appears to have used the “Legal Consulting” descriptor to camouflage payments of settlement amounts, which would be an understandable work-around that honors the confidentiality provision that appears in most settlement agreements. However, in the matter that was reported on, the payment was issued to the plaintiff’s attorney, not to Trump Corporation. Paying a plaintiff's attorney is a typical method for paying settlements, just as paying a plaintiff directly is. Paying a defendant a settlement amount owed to a plaintiff is not common. Therefore it does not make sense for the $90k payment to the Trump Corporation to be a disguised settlement.

Aside from settlements and legal fees/expenses, which are not public information, and judgments, which are almost always public (and which are paid directly to the prevailing party in a legal dispute, if not held in escrow by the court during an appeal), there is not any other cost that easily falls within the “Legal Consulting” descriptor. In light of the governing law and the way that this payment was structured, it is hard to continue giving this payment to Trump Corporation the benefit of the doubt.

 

So there you have it. Based on this person's impression, both the Trump campaign and the Trump corporation have some explaining to do. A complete summary of Trump campaign disbursements for legal consulting can be found below

Recipient Total Disbursements for Legal Consulting
JONES DAY $3,497,882
LOCKE LORD LLP $126,568
THE TRUMP CORPORATION $89,561
LAROCCA HORNIK ROSEN GREENBERG & BLAHA LLP $80,999
KASOWITZ, BENSON, TORRESS & FRIEDMAN $69,316
PARLIAMENTARY STRATEGIES, LLC $55,347
VAN HOY, REUTLINGER, ADAMS & DUNN, PLLC $50,603
THE LAW OFFICES OF ALAN S. FUTERFAS $50,000
BELKIN BURDEN WENIG & GOLDMAN, LLP $23,967
BELL, MCANDREWS, & HILTACHK, LLP $5,000
MICHAEL A. FRANCE TRUST $3,000
WEISERMAZARS, LLP $2,100
LANDRUM SHOUSE, LLP $734
JENSEN & ASSOCIATES, APC $600

Regardless of whether or not you are willing to give these entities the benefit of the doubt, and regardless of whether or not you support the President's policies, anyone honestly evaluating this situation must conclude that these financial entanglements harm the credibility of the President's office. The only resolution to this problem is to codify the modern tradition that Presidents release their tax returns and place their assets in a blind trust. Here are some form letters you can use to lobby your representatives to do just that: this one is for your congressional representatives, and this one is for your state representatives. Don't count out state level action as a path to meaningful reform. States can pass laws that place requirements on who is eligible to appear on the ballot in presidential elections. It will only take a few states to pass a law making release of tax returns a ballot requirement to effectively force any serious candidate from complying. Also check out writetocongress.org to find your federal and state representatives and prepare the letterhead for you if you want.

Here's the running total of payments from the Trump campaign to Trump businesses. Note, that we forgot to include payments to Mar A Lago during the 2016 campaign in previous reports, but these are now included. Stay tuned for third quarter update coming in a few months!

Recipient Total Disbursements
TAG AIR, INC. $8,741,464
TRUMP TOWER COMMERCIAL LLC $2,275,318
THE MAR-A-LAGO CLUB, LLC $435,374
TRUMP INTERNATIONAL HOTEL LAS VEGAS $277,215
TRUMP RESTAURANTS LLC $213,742
TRUMP PAYROLL CORP $202,013
THE TRUMP CORPORATION $172,166
TRUMP PLAZA LLC $153,000
TRUMP NATIONAL GOLF CLUB $81,322
TRUMP CPS LLC $72,000
TRUMP INTERNATIONAL HOTEL $52,818
TRUMP NATIONAL GOLF CLUB - WESTCHESTER $48,239
TRUMP NATIONAL DORAL $45,998
ERIC TRUMP WINE MANUFACTURING, LLC $32,196
TRUMP INTERNATIONAL GOLF CLUB, L.C. $29,715
TRUMP NATIONAL GOLF CLUB WASHINGTON DC $20,144
TRUMP INTERNATIONAL HOTEL AND TOWER CHICAGO $19,379
TRUMP HOTEL $18,300
TRUMP SOHO $12,761
TRUMP NATIONAL GOLF CLUB CHARLOTTE $9,480
TRUMP INTERNATIONAL HOTEL AND TOWER $5,254
TRUMP OLD POST OFFICE LLC $5,000
TRUMP NATIONAL GOLD CLUB - BEDMINSTER $4,275
TRUMP INTERNATIONAL GOLF CLUB - BEDMINSTER $4,275
TRUMP INTERNATIONAL HOTEL WASHINGTON DC $4,043
TRUMP ICE LLC $3,853
TRUMP VIRGINIA ACQUISITIONS, LLC $2,326
TRUMP INTERNATIONAL HOTEL CHICAGO $1,536
TRUMP NATIONAL DORAL MIAMI $1,473
TRUMP PARK AVENUE, LLC $868
THE TRUMP SECURITY $829
TRUMP HOTEL SOHO $671
TRUMP GRILL $607
TRUMP NATIONAL GOLF CLUB DC $479
TRUMP INTL HOTEL $335
TRUMP RESTAURANTS $234
TRUMP SOHO NEW YORK $100
TRUMP CAFE $94

The data for this report can be found on the FEC website, you can also get the source code for processing and plotting the data on GitHub.